Jindal Steel and Power (JSPL) has deferred the company's AGM wherein it was going to decide on the divestment of its wholly owned subsidiary Jindal Power Ltd (JPL) to its promoter family. Investors have pushed back against this move and JSPL may revise the deal, sources told Business Line. The meeting was scheduled on May 24 but the new date has not been announced yet.

According to Chennai-based shareholder advisory firm Ingovern, the enterprise value of JPL is in the range of ₹10,000-12,000 crore, but the promoters want to take control of 96.42 per cent of the company for just ₹3,015 crore. Also, few brokerages have downgraded the stock citing the lopsided deal. However, JSPL has said that the Ingovern report has presented an incorrect picture of the deal.

Hence, Ingovern has asked JSPL shareholders to reject the divestment proposal. Further, Ingovern has also asked shareholders to reject the conversion of JPL’s inter-corporate deposits and capital advance to JSPL into loans and to treat the divestment proposal as a related party transaction.

Huge discount

According to Ingovern, the sale price of ₹3,015 crore is far below the market price of the recent comparable transactions including Adani Power’s 1,370-MW plant valued at ₹4,792 crore (₹3.49 per megawatt) and NTPC’s 600-MW valued at ₹1,900 crore (₹3.17 per megawatt).

“This proposal fails to explain in a compelling manner why JSPL is selling JPL, given that it is a healthy company with a positive future, at such a huge discount to comparable market values. The rationale provided by JSPL is specious at best and outright falsehood.

“The proposal is facilitating the sale at a low price for a soon-to-be profit-making, fully operational subsidiary. This will be against the interest of minority shareholders of JSPL,” Ingovern said. In fact, Ingovern says that even JPL had valued the captive power plants of JSPL at much higher valuations.

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